Price fears in Safeway scramble

By Kate Rankine, Deputy City Editor

12:01AM BST 01 May 2003

Sir Derek Morris, the Competition Commission chairman heading the inquiry into the Safeway takeover battle, yesterday warned the four supermarket bidders that the industry has changed considerably since his 2000 investigation.

Speaking at a public meeting at Haberdashers' Hall, London, Sir Derek said his inquiry would include looking at non-food sales, smaller stores and the pricing policies of rival supermarket groups.

"It may be useful, but you should not read across from that [2000] report," he said. "It could be very different. A merger might create a competitive problem that was not a problem at all in 2000."

The meeting was attended by the chief executives of the four supermarket bidders - Tesco, J Sainsbury, Asda and Wm Morrison. Each addressed the meeting on local competition issues, and national issues, including the impact on suppliers of a Safeway takeover.

Sir Derek pointed out that all four bidders promised to lower Safeway's prices if they acquired the chain. "It's an important issue," he pondered. "But is it low prices or choice for consumers?"

Representatives of the National Farmers' Union claimed that any further concentration in food retailing would have a "catastrophic" impact on farmers, although the Consumers' Association is supporting Wm Morrison.

Sir Peter Davis, chief executive of Sainsbury, argued against Tesco or Wal-Mart being cleared to bid. He said: "We believe that if either were to be successful in securing Safeway, then the resulting duopoly would be very much against the interests of both customers and suppliers."

But Sir Terry Leahy, Tesco's chief executive, claimed that Tesco would reduce Safeway prices by 11pc across a broad range of products. He added: "It would be perverse to deny a wider group of customers the chance to have access to what Tesco has to offer to customers."

Sir Ken Morrison, chairman of Wm Morrison, argued that Morrison and Safeway would create a fourth national food retailer "capable of offering a value-based retail challenge to Safeway's three larger national competitors".

Tony De Nunzio, Asda's chief executive, claimed that competition would be enhanced if Asda acquired Safeway. "It would satisfy the pent-up demand for Asda. Millions more shoppers would benefit from lower prices."

The commission is due to complete its report by August 12. An "issues" letter, outlining the main points to be considered, will be published this month.